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The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and Bengal Bank.
The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras
(1843) as independent units and called it Presidency Banks.


c

Nationalisation of Imperial Bank of India with extensive banking facilities on a large scale specially in
rural and semi-urban areas.

It formed State Bank of india to act as the principal agent of RBI and to handle banking transactions of
the Union and State Governments all over the country.

Seven banks forming subsidiary of State Bank of India was nationalised in 1960 on 19th July, 1969, major
process of nationalisation was carried out. 14 major commercial banks in the country was nationalised.

The second phase of nationalisation of Indian banks took place in the year 1980. Seven more banks were
nationalised with deposits over 200 crores. Till this year, approximately 80% of the banking segment in
India were under Government ownership.

ccc%
c&'

The nationalisation of banks in India took place in 1969 by Mrs. Indira Gandhi the then prime minister. It
nationalised 14 banks then. These banks were mostly owned by businessmen and even managed by
them.

Central Bank of India Bank of Maharashtra Dena Bank

Punjab National Bank Syndicate Bank Canara Bank

Indian Bank Indian Overseas Bank Bank of Baroda

Union Bank Allahabad Bank United Bank of India

UCO Bank


c

This phase has introduced many more products and facilities in the banking sector in its reforms
measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his name
which worked for the liberalisation of banking practices.

The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a
satisfactory service to customers. Phone banking and Net banking is introduced. The entire system
became more convenient and swift. Time is given more importance than money.

c&'c

In India the banks are being segregated in different groups. Each group has their own benefits and
limitations in operating in India. Each has their own dedicated target market.

Few work in rural sector while others in both rural as well as urban. Many even are only catering in
cities.

Some are of Indian origin and some are foreign players.

"#
 !"

ü Among the Public Sector Banks in India, United Bank of India is one of the 14 major banks which
were nationalised on July 19, 1969. Its predecessor, in the Public Sector Banks, the United Bank
of India Ltd., was formed in 1950 with the amalgamation of four banks viz. Comilla Banking
Corporation Ltd. (1914), Bengal Central Bank Ltd. (1918), Comilla Union Bank Ltd. (1922) and
Hooghly Bank Ltd. (1932).

ü This Public Secotor Bank India has implemented 14 point action plan for strengthening of credit
delivery to women and has designated 5 branches as specialized branches for women
entrepreneurs.


( !"

 ü The first Private bank in India to be set up in Private Sector Banks in India was IndusInd Bank. It
is one of the fastest growing Bank Private Sector Banks in India.

ü IDBI ranks the tenth largest development bank in the world as Private Banks in India and has
promoted a world class institutions in India.

ü The first Private Bank in India to receive an in principle approval from the Reserve Bank of India
was Housing Development Finance Corporation Limited, to set up a bank in the private sector
banks in India as part of the RBI's liberalisation of the Indian Banking Industry.

ü It was incorporated in August 1994 as HDFC Bank Limited with registered office in Mumbai and
commenced operations as Scheduled Commercial Bank in January 1995.

!!)
(" 




ü The Co operative banks in India started functioning almost 100 years ago.

ü Though the co operative movement originated in the West, but the importance of such banks
have assumed in India is rarely paralleled anywhere else in the world.

ü The cooperative banks in India plays an important role even today in rural financing. The
businesses of cooperative bank in the urban areas also has increased phenomenally in recent
years due to the sharp increase in the number of primary co-operative banks.

ü Co operative Banks in India are registered under the Co-operative Societies Act. The cooperative
bank is also regulated by the RBI. They are governed by the Banking Regulations Act 1949 and
Banking Laws (Co-operative Societies) Act, 1965.

ü This exponential growth of Co operative Banks in India is attributed mainly to their much better
local reach, personal interaction with customers, their ability to catch the nerve of the local
clientele.

#"


ü Rural banking in India started since the establishment of banking sector in India. Rural Banks in
those days mainly focussed upon the agro sector.
 ü The Haryana State Cooperative Apex Bank Ltd. commonly called as HARCOBANK plays a vital
role in rural banking in the economy of Haryana State and has been providing aids and financing
farmers, rural artisans, agricultural labourers, entrepreneurs, etc. in the state and giving service
to its depositors.

National Bank for Agriculture and Rural Development (NABARD) is a development bank in the
sector of Regional Rural Banks in India. It provides and regulates credit and gives service for the
promotion and development of rural sectors mainly agriculture, small scale industries, cottage
and village industries, handicrafts

%!
" 




ü Foreign Banks in India always brought an explanation about the prompt services to customers.
After the set up foreign banks in India, the banking sector in India also become competitive and
accurative.

ü New policies are introduced by RBI for them

The policy conveys that foreign banks in India may not acquire Indian ones (except for
weak banks identified by the RBI, on its terms) and their Indian subsidiaries will not be
able to open branches freely.


!)
!  !"
 !

ü Post offices.

ü Mutual fund

ü Share market

ü Insurance.

ü Money lenders

ü Family and friends

  
!

ü Banking industry has been undergoing a rapid transformation.

ü Banks today are market driven and market responsive.

ü With the entry of new players and multiple channels, customers (both corporate and retail)
have become more discerning and less "loyal" to banks. This makes it imperative that banks
provide best possible products and services to ensure customer satisfaction.

ü They have been managing a world of information about customers - their profiles, location,
needs, requirements, cash positions, etc.

ü Furthermore, banks have very strong in-house research and market intelligence units in order to
face the future challenges of competition, especially customer retention.

ü They are focusing on region-specific campaigns rather than national media campaigns as
effective strategy for a diverse country like India.

ü Customer-centricity also implies increasing investment in technology.

ü Apart from the Mobile Banking, including of SMS Banking, Net Banking and ATMs are the major
steps taken by the banks in India towards modernization.

Services given by banks

ü Demat account

ü Lockers

ü Cash management

ü Insurance product

ü Mutual fund product

ü Loans

ü ECS(Electronic clearance system)?

ü Taxes
!
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As the real sector reforms began in 1992, the need was felt to restructure the Indian banking
industry. The reform measures necessitated the deregulation of the financial sector,
particularly the banking sector. The initiation of the financial sector reforms brought about a
paradigm shift in the banking industry. In 1991, the RBI had proposed to from the committee
chaired by M. Narasimham, former RBI Governor in order to review the Financial System viz.
aspects relating to the Structure, Organisations and Functioning of the financial system. The
Narasimham Committee report, submitted to the then finance minister, Manmohan Singh, on
the banking sector reforms highlighted the weaknesses in the Indian banking system and
suggested reform measures based on the Basle norms. The guidelines that were issued
subsequently laid the foundation for the reformation of Indian banking sector.

+
! 
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i. Reduction of Statutory Liquidity Ratio (SLR) to 25 per cent over a period of five years
ii. Progressive reduction in Cash Reserve Ratio (CRR)
iii. Phasing out of directed credit programmes and redefinition of the priority sector
iv. Deregulation of interest rates so as to reflect emerging market conditions
v. Stipulation of minimum capital adequacy ratio of 4 per cent to risk weighted assets by
March 1993, 8 per cent by March 1996, and 8 per cent by those banks having
international operations by March 1994
vi. Adoption of uniform accounting practices in regard to income recognition, asset
classification and provisioning against bad and doubtful debts
vii. Imparting transparency to bank balance sheets and making more disclosures
viii. Setting up of special tribunals to speed up the process of recovery of loans
ix. Setting up of Asset Reconstruction Funds (ARFs) to take over from banks a portion of
their bad and doubtful advances at a discount
x. Restructuring of the banking system, so as to have 3 or 4 large banks, which could
become international in character, 8 to 10 national banks and local banks confined to
specific regions. Rural banks, including RRBs, confined to rural areas
xi. Abolition of branch licensing
xii. Liberalising the policy with regard to allowing foreign banks to open offices in India
xiii. Rationalisation of foreign operations of Indian banks
xiv. Giving freedom to individual banks to recruit officers
xv. Inspection by supervisory authorities based essentially on the internal audit and
inspection reports
xvi. Ending duality of control over banking system by Banking Division and RBI
xvii. A separate authority for supervision of banks and financial institutions which would be a
semi-autonomous body under RBI
xviii. Revised procedure for selection of Chief Executives and Directors of Boards of public
sector banks
xix. Obtaining resources from the market on competitive terms by DFIs
xx. Speedy liberalisation of capital market
xxi. Supervision of merchant banks, mutual funds, leasing companies etc., by a separate
agency to be set up by RBI and enactment of a separate legislation providing
appropriate legal framework for mutual funds and laying down prudential norms for
such institutions, etc.

Several recommendations have been accepted and are being implemented in a phased manner.
Among these are the reductions in SLR/CRR, adoption of prudential norms for asset
classification and provisions, introduction of capital adequacy norms, and deregulation of most
of the interest rates, allowing entry to new entrants in private sector banking sector, etc.

Keeping in view the need of further liberalisation the Narasimham Committee II on

Banking Sector reform was set up in 1997. This committee͛s terms of reference included review
of progress in reforms in the banking sector over the past six years, charting of a programme of
banking sector reforms required to make the Indian banking system more robust and
internationally competitive and framing of detailed recommendations in regard to make the
Indian banking system more robust and internationally competitive.

+
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i. Capital adequacy requirements should take into account market risks also
ii. In the next three years, entire portfolio of Govt. securities should be marked to market
iii. Risk weight for a Govt. guaranteed account must be 100 percent
iv. CAR to be raised to 10% from the present 8%; 9% by 2000 and 10% by 2002
 v. An asset should be classified as doubtful if it is in the sub-standard category for 18
months instead of the present 24 months
vi. Banks should avoid ever greening of their advances
vii. There should be no further re-capitalization by the Govt.
viii. NPA level should be brought down to 5% by 2000 and 3% by 2002.
ix. Banks having high NPA should transfer their doubtful and loss categories to ARCs which
would issue Govt. bonds representing the realisable value of the assets.
x. International practice of income recognition by introduction of the 90-day norm instead
of the present 180 days.
xi. A provision of 1% on standard assets is required.
xii. Govt. guaranteed accounts must also be categorized as NPAs under the usual norms
xiii. There is need to institute an independent loan review mechanism especially for large
borrowal accounts to identify potential NPAs.
xiv. Recruitment of skilled manpower directly from the market be given urgent
consideration
xv. To rationalize staff strengths, an appropriate VRS must be introduced.
xvi. A weak bank should be one whose accumulated losses and net NPAs exceed its net
worth or one whose operating profits less its income on recap bonds is negative for 3
consecutive years.

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